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Friday, December 4, 2015

Another Day, Another Job on the Block - The Solution

The Answer to Job Losses

Producers are the lifeblood of the economy. These are the people that make things and/or add value to things that are part of our everyday existence. For example, they include the chefs that prepare and manufacture our food, builders for our houses and infrastructure, engineers constructions and tools, bakers, farmers, butchers, and many more. We know them in their workshops, kitchens, factories, foundries and work sites.

When the Producers work, they created something, or transforms something that is useful to themselves, and to others. Their production is used by people, and other producers. Producers add direct value to their consumers and employees. Indirectly, the community benefits through taxes that are levied on producers' earnings.

The benefits to the Producer and community increase when the producer does business outside the community, province or country. It brings revenue into the area. It increases the scope of the value they provide.

Producers are important because they form the tax base, and economic foundation of any society's social and public services. They pay company taxes on profits. Their staff pay personal income taxes from what they earn. In addition, Producers contribute to insurance, pensions, levies and licenses, which all serve to enhance our society.

Because of Producers' efforts, it is possible to have healthcare, social services, education and shared infrastructure. All government sponsored social and infrastructural services is ultimately coming from the wealth generated by producers.

Producers contribute to people's lives by providing meaningful employment. People are employed directly by the Producer to work in the businesses. Indirectly, people work in public services that is financed by the tax revenue.

Why be interested in Producers?

Learning and creating, the ingredients for producing, are natural human qualities. By making something, people find self-worth, recognition, meaning, growth, and purpose in life. Producers make things, and provide opportunities for people to work with, and for them, to make things. They make it possible for people to live well.

Having healthy Producers in a community allows the community to benefit overall from the same qualities offered to the individual: A community's self worth, purpose, recognition, progress, and more is built on the foundation of Producers, the jobs they provide, and the social services they finance.

Communities with strong and growing Producers, and an increase in the number of producers are communities that are healthy and progressive. If we have more producers amongst us, we are all collectively better off. If we make it easy for Producers to produce, and to trade their production, everybody benefits.

Jobs at Risk

The Calgary Herald reports that in Alberta, Canada, group layoffs during 2015 have surpassed 18,000 workers. These are only layoffs off people in groups and reported to the Provincial Government. Provincially, the number of EI recipients was up 99 per cent, or 28,830 people, from a year earlier. In November alone, 2015 the province shed 14,900 positions and crossed the threshold for 7% unemployed.

Canmore, Alberta

The Huffington Post reports that Alberta lost 52,800 jobs in the past year, or 2.6 per cent of all positions in the province, the largest loss of any province. Saskatchewan came second, with a loss of 6,800 jobs, or 1.4 per cent of the province's total.

Canada lost jobs at the fastest pace since the Great Recession, Statistics Canada’s latest payroll report shows in August 2015.

While many of these job losses is attributed to the pressure in the energy producing sector, it is not all as a result of the price pressure on oil.

MIT Technology Review reported in 2013 that Oxford researchers estimate that 45 percent of America’s occupations will be automated within the next 20 years. The authors believe the takeover will happen in two stages. First, computers will start replacing people in especially vulnerable fields like transportation/logistics, production labor, and administrative support. Jobs in services, sales, and construction may also be lost in this first stage.

Then, the rate of replacement will slow down due to bottlenecks in harder-to-automate fields such engineering. This “technological plateau” will be followed by a second wave of computerization, dependent upon the development of good artificial intelligence. This could next put jobs in management, science and engineering, and the arts at risk.

The bottom line is that jobs are flying out the door thanks to economic downturns or through technological advances. It is bound to become even scarcer in the near future for many reasons. Some locations and industries are hurting more than others. One thing is certain, every job is possibly at risk.

What is happening to the jobs? Are producers still producing, but not employing anymore, or is it that we are losing Producers?

In this post, it should be evident that this is not a simple answer. What is simple though, is recognizing our society's dependence on the real job creators are - our Producers - and their motivations for doing what they do.

Regardless of technology reducing the need for human labour, which is is inevitable in progress, there will always be scope for production and another innovative way to make something that makes life easier, or gives more meaning. Someone had to conceive it, finance it, risk and exerted effort to realize it. The real jobs are those of people that produce, or the jobs available as a result of someone else producing. We all need Producers.

Where's the Beef

The public sector is hiring. The Financial Post reported in June 2015 that the Public sector is ‘crowding out’ private job growth in Canada. According to the Toronto Sun, growth in government employment has eclipsed the private sector, especially in Ontario. In Alberta 15% of jobs are in the public sector earning a combined $21.1 Billion (52%) in wages and salaries of $40.4 Billion of total government expenditure in 2014. Is this a good thing?

No one can argue with the landslide political landscape change in Canadian politics in 2015.

First, the Albertans got rid of the Progressive Conservative government by exchanging it for a public service and Union supported NDP. Then the rest of Canada decided that it was time to give the Liberal social agenda more scope, by voting in Justin Trudeau and the multicultural Liberal Party.

The Progressive Conservatives in Alberta, and the Federal Conservative parties both cautioned about the financial pressure on the Canadian economy. This caution was based on the soft outlook of the energy sector and the drop in the price of oil, after years of the manufacturers being under pressure in Canada. They warned that the softening may require adjustment in public spending due to less tax revenues (i.e. less people having jobs in the public sector, because there are not enough tax revenue to keep everyone employed). If producers are suffering, then taxes will be less to finance public spending.

The result for both parties who cautioned fiscal responsibility, was that they were dispatched in favour of the newcomer NDP and Liberals. Both these new incumbent parties are recognized as big public spenders. The NDP and Liberal parties are quite vocal about their intent to not only preserve the current public employment sector provincially and federally, but intend to expand it wholesomely.

While every tax paying worker in Alberta, not in public service, is taking a haircut by losing their job or foregoing increases and bonuses, the NDP made it clear in that province, that their support base has nothing to fear. Alberta Finance Minister Joe Ceci stated publicly, that he will not revisit collective labour deals (Edmonton Sun 4 November, 2015).

They key message is that if times are tough, and if jobs are on the line, then you better back the biggest employer in Canada - the Government. You better elect the party that will keep the public sector working and the public spending going.

But wait. Who's paying for all this? There is always the uncomfortable recognition that someone has to fit the bill for social spending, eventually. Remember that in social spending, most of the time, the benefactor is not the contributor. Other people's money is spent.

As we've seen above, Producers are ultimately the foundation of the economy's and the government's revenue base. They create the value, and is the tax base for public services. If the private sector workers, employed by Producers, are losing their jobs, and companies are scaling back (i.e. is not paying the taxes they used to), and the public sector is growing (i.e. the government keeps on spending to maintain their support base), then revenue is bound to come under considerable pressure.

A typical and familiar strategy comes to mind, and which is playing out as predictably as always:

Increase Taxes: The Globe and Mail reported in September that the NDP planned on added almost CAD$7 Billion in additional taxes. The most recent announcement of a carbon taxes loaded another $30 Billion on the backs of "earners" (read Producers here). Together with tax increases on the "wealthy", and corporates, the Alberta Government will bring in an additional $1.5 billion in 2015, and $4.6 billion in revenue over the next two years. (BNN, 27 October, 2015). With the increase in spending, this doesn't appear to be enough though? Which, brings us to the next familiar Strategy: Borrow.

Borrow More: The NDP is on a borrowing rampage. Total debt is set to hit $18.9 billion this year. That figure will swell $36.6 billion by 2018 but could grow as high as $47 billion by the end of 2019-20. (National Post, 27 October, 2015)

Sadly, the change in Alberta's fortunes is not new. The game has been played before by much bigger players. In Canada's landscape, the "have Provinces" have been subsidizing the "have not Provinces" and their bloated bureaucracies for years. The US economy is another drunk on debt, anemic job growth, and an explosion in public sector spending and overbearing regulations. The Standard Weekly in 2012 reported that the total US national debt is US$16.8 Trillion, which is 35% higher per capita that one of Europe's most broke countries: Greece! It has kept growing.

There are many articles to quote about the ongoing increase in taxes, bloated public services and astronomic national debts. All sing a familiar and similar song: The government must provide. The people need more. The businesses are greedy and should complain less. The problem is that eventually even the Government can no longer pay its bills if there is less or no revenue by willing Producers.

What's Wrong With This Picture?

If you are in the public service or a corporation that is benefitting from government financial or regulatory support, then it is still going well for you overall. The public sector is currently on the receiving end of all the increase in funding through taxation and borrowing of the newly elected Governments.

The recent Liberal shift in public sentiment bears testimony to people's reach for safety in uncertain times. They look to the Government to provide the jobs and the social safety nets when times are hard. Any Government seen to waver or communicate restraint is seen as risking the status quo. However, even the borrowing, taxing and spending governments are fast running out of options as they and their country's citizens run out of money.

Producers, facing the brunt of taxations, regulations and a difficult market, are revenue contributors to the punch drunk governmental spending party. For them, the motivation to produce, for others to spend during hard times, become more and more unattractive. The look ahead is also not inspiring with high public dept that will need to be serviced in future.

The simple result is that Producers scale back, or stops producing all together. There simply is no motivation to create something under difficult circumstances that is bound to be taken away from you anyway. Producers are not signing up for new risks. They are no longer investing, creating or open for business. The Financial Post reported in 2014 that CAD $630 Billion of cash is held back by Canadian companies, and not being invested in growth and expansion. This amount continues to grow. Why invest, expand and employ of there is a slim chance of holding on to the spoils. Why exert effort to only be told to handover more of it, to a non-supportive (or Producer non-representative) Government?

Margaret Thatcher's quote comes to mind: “The problem with socialism is that you eventually run out of other people's money.”

Getting it Right

The answer to job losses and economic pressures is not to expand the public purse by growing public services, increasing taxes and borrowing. Government and public services should not be the employer of choice. when that happens, no only has a society given away its liberty, but it is also killing its future.

If true wealth comes from Producers, then it is time for Producers to be included, cherished, and supported. When Producers grow, and the number of Producers increase, then jobs become available. More public funding for public services become accessible, not because the Producers are taxed more. Rather, because more are producing for the tax base to expand. More Producers are contributing so that everyone can benefit.

The right way is to support Producers to grow their businesses when times are tough, and to make it easy for more people to become Producers.

Give producers incentives to produce. It is hard enough in a tough market to succeed in business. Governments should not make it harder. The simplest way to unleash the resourcefulness of innovative hardworking producers is to make it easy for people to start a producing business, and to keep it fair for them to compete in a market. Government should simply get out of the way, and allow Producers to keep a little more of the benefits for their efforts. Everyone will be better off as a result.

This is why we celebrate entrepreneurs and committed people with producing businesses. They form the backbone of a community and a society. They are are the foundation of a country's success. It is time we recognize them and their efforts.